Bad Debt of Loan given to non related party, Income Tax

[Anand Paltewar]

We are in to seed and fertilizers trading business we are also doing money lending in same Proprietary firm, one loan of rs 2000000 become bad debt now ,as per provision sec 36 we have not billed or sale any goods and services to that firm.we are paying tax on interest on loan . so is it logical to claim bad debt of loan which is default.

Request you to guide us can I show Bad Debt in my P&L .

Anand

Posts / Replies

[MARIAPPAN GOVINDARAJAN]

Your query is not clear.

[Anand Paltewar]

We have given loan of ₹ 2000000 to one party .

now loan is default ,he is not not in position to pay intrest and principal from last 4 years.

Can we show ₹ 2000000 bad debt in books ?

[Ganeshan Kalyani]

It need to be studied, as lending money is your second business , trading of seed being primary. Business related expenses are allowed as deduction in profit and loss account. Do you prepare one p&l, b/s for both the business?

[Anand Paltewar]

Yes ,we prepare only one p&l and B/s for both business under proprietary firm.

[Ganeshan Kalyani]

If it is so then the bad debt should be allowed to be debited to P&L. However, i welcome views of my collegue expert in this regard. Thanks.